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The New York State Department of Environmental Conservation (“NYSDEC”) has received numerous inquiries about issues arising with the execution of Brownfield Cleanup Program (“BCP”) agreements and amendments because of the Covid19 pandemic. In response, the NYSDEC has issued the following guidance:
- The DYSDEC will grant reasonable extensions of time for the execution of Brownfield Cleanup Agreements (BCA) and BCA Amendments on a case-by-case basis. Requests for extensions should be made to the appropriate Project Manager/Project Attorney.
- For pending amendments reflecting the transition from Generation 2 to Generation 3 of the program, the agency has granted an extension until June 1, 2020 for the submission of the executed amendment.
- The NYSDEC is not prepared to dispense with the notary requirement at this time but is currently investigating alternatives. If applicants encounter issues related to obtaining a notarization, the applicant should contact Jennifer Andaloro, Esq., Section Chief, OGC Remediation Bureau at firstname.lastname@example.org.
- The Department will accept electronically signed agreements and amendments during the COVID-19 State of Emergency and will reassess its policy of requiring original/hard copies thereafter.
- As discussed in a previous Post , the NYSDEC has developed guidance interpreting what constitutes essential construction activities under Governor Cuomo’s Executive Order 202.6 for the Brownfield, Superfund and Spill Response programs.
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In a prior post, we discussed a letter NYSDEC issued to staff and standby contrators interpreting Governor Cuomo’s Executive Order 202.6 (EO) and the Empire State Development Corporation Guidance on shutdown of all non-essential services and activities.
DEC has now posted further clarification on its website that it considers the following activities as essential services:
- Remedial construction activities, including new construction starts, at sites that DEC has determined pose a significant threat to public health and/or the environment, including Class 2 sites on the Registry of Inactive Hazardous Waste Disposal Sites and significant threat sites in the Brownfield Cleanup Program,
- Completion of remedial construction already under way at non-significant threat sites as necessary to ensure site safety and prevent exposure to site contaminants, including completion of site cover systems,
- Operation and maintenance activities for active remedial systems that are necessary for the continued protection of human health and the environment,
- Interim remedial measures to address imminent human exposures and/or threat of significant contaminant migration,
- Spill response actions,
- Investigation, including pre-design investigations, of petroleum and hazardous waste releases as determined by DEC on a case-by-case basis to be necessary to address potential human exposures and/or threat of significant contaminant migration
The NYSDEC cautioned that these criteria are subject to change and refinement as the response to the Covid-19 pandemic is fluid. Essential work must continue to comply with the guidance and directives for maintaining a clean and safe work environment issued by the Department of Health and every business, even if essential, must maintain social distance to the extent possible.
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To prevent spread of COVID-19, the New York State Department of Environmental Conservation (NYSDEC) will exercise its enforcement discretion with respect to certain provisions of 6 NYCRR Parts 364,372,374-2, and 381. According to a Letter issued by the NYSDEC Office of General Counsel, the agency will not pursue enforcement of requirements for signatures on waste shipping documents. lf a waste shipment is being sent to, or is being received from, a state other than New York, the regulated party should contact the other state regulator to ensure compliance with that state’s requirements.
For hazardous waste shipments, affected parties shall use hybrid and electronic hazardous waste manifests, whenever those options are available to all parties listed on the manifest. If this option is not available to all parties listed on the manifest so that a paper-based hazardous waste manifest must be used, all affected parties must follow the specified procedure from Appendix 30 of 6 NYCRR Part 372 for a transporter signing “on behalf of’ a generator for a hazardous waste shipment.
For Non-Hazardous Waste and Used Oil Shipments, the following procedure must be followed:
- The driver picking up the waste must print the name of the generator in the Generator Name box.
- The driver must write “on behalf of in the Generator Signature box and then sign the driver’s name in the appropriate space.
- lf there is only a Generator Signature box on the waste shipping document, the driver must write “on behalf of’, print the generator’s name, and then sign the driver’s name in that box.
For Low-Level Radioactive Waste Shipments, all affected parties shall follow the specified procedure in 6 NYCRR 381.12for a transporter signing “on behalf of’ a generator for a low-level radioactive waste shipment.
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Pursuant to Empire State Development Corporation’s Guidance on Executive Order 202.6, “trash and recycling collection, processing and disposal services” are considered essential business or entities that are not required to reduce in-person workforce by 100%. The exclusion includes collection, transportation, processing and disposal activities for any solid wastes, regulated medical waste, hazardous wastes, radioactive wastes and other associated waste categories. This also includes all recyclables including redemption of bottle bill containers.
The NYSDEC has Announced that it will not actively enforce violations at facilities unable to fulfill bottle bill redemption operations due to resource restrictions during the ongoing COVID-19 response efforts.
The agency said it recognizes that unintended consequences of the COVID-19 response may make full compliance with requirements challenging for certain facilities and may result in temporary disruptions to required redemption operations.
Redemption of containers is considered an essential service and NYSDEC said that redemption centers should implement appropriate social distancing practices whenever and wherever possible.
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On March 30th, the NYC Department of Buildings issued a memo implementing Governor Cuomo’s Executive Order 202.6 (EO) and New York State Empire Development Corporation Guidance requiring the shutdown of all non-essential construction except emergency construction
For projects enrolled in its Voluntary Cleanup Program or the “e” designation program, OER will implement the construction ban on as follows:
- Affordable housing projects (defined as those building affordable inclusionary housing, mandatory inclusionary housing or sites where 30% of more of the residential units are affordable) are deemed essential and can continue with construction activities. Similarly, other essential projects identified in the Governor’s order, e.g. homeless shelters and transit facilities, etc., can continue with construction.
- OER projects that are considered non-essential but have broken ground and where activities may be suspended without compromising public health must cease construction.
- Sites with approved remedies that have not yet broken ground and their development is not essential per the Governor’s EO cannot commence construction until the Governor’s construction ban is lifted or modified.
- Sites in the investigation sampling phase that are not essential must suspend work.
For each OER site that will continue operations, the development team must submit a statement to the OER Project Manager explaining the basis for each project’s continued operation. These statements must be submitted by the close of business on Wednesday, April 1.
Owners and contractors of construction and demolition sites subject to the suspension order must secure and maintain their sites in accordance with the NYC Department of Buildings Buildings Bulletin 2020-004 .
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The federal Environmental Protection Agency has issued a Memo announcing that it will temporarily exercise enforcement discretion for certain violations where the non-compliance was a result of the COVID-19 pandemic.
EPA’s enforcement discretion policy which is retroactive to March 13th applies to civil violations that occur during the COVID-19 pandemic. It does not apply to intentional criminal violations of law. The policy also does not pertain to remedial activities that are carried out under Superfund and RCRA Corrective Action enforcement instruments. EPA will address these matters in separate communications.
The temporary enforcement discretion policy does relieve any entity from the responsibility to prevent, respond to, or report accidental releases of oil, hazardous substances, hazardous chemicals, hazardous waste, and other pollutants as required by federal law.
The policy addresses different categories of noncompliance differently. For example, the EPA will not seek penalties for violations of routine compliance monitoring, integrity testing, sampling, laboratory analysis, training, and reporting or certification obligations in situations where the EPA agrees that COVID-19 was the cause of the noncompliance and the entity provides supporting documentation to the EPA upon request. However, the agency expects operators of public water systems to continue to ensure the safety of our drinking water supplies.
During the COVID-19 crisis, EPA said it will focus its resources largely on situations that may create an acute risk or imminent threat to public health or the environment.
The policy describes the general steps that regulated facilities should take to qualify for enforcement discretion for civil violations.
- Entities should make every effort to comply with their environmental compliance obligations.
- If compliance is not reasonably practicable, facilities with environmental compliance obligations should:
a. Act responsibly under the circumstances in order to minimize the effects and duration of any noncompliance caused by COVID-19;
b. Identify the specific nature and dates of the non-compliance;
c. Identify how COVID-19 was the cause of the noncompliance, and the decisions and actions taken in response, including best efforts to comply and steps taken to come into compliance at the earliest opportunity;
d. Return to compliance as soon as possible; and
e. Document the information, action, or condition specified in items (a) through (d).
The policy then discusses requirements for specific categories of non-compliance.
Administrative Settlements- If parties to an EPA administrative settlement agreement anticipate missing enforceable milestones or obligations set forth in these documents as a result of COVID-19, EPA said they comply with the notice procedures set forth in the agreement, including notification of a force majeure where applicable. The notification should provide the information required by the agreement. EPA staff will review these notifications and may contact a party to seek adjustments to a proposed plan of action, pursuant to the agreement.
Consent Decrees- Parties to judicial consent decrees are advised to comply with the notice procedures set forth in the consent decree, including notification of a force majeure where applicable for any noncompliance alleged to be caused by COVID-19. EPA staff will coordinate with U.S. Department of Justice (DOJ) to exercise enforcement discretion for stipulated penalties for the routine compliance obligations. However, EPA cautioned that courts retain jurisdiction over consent decrees and may exercise their own authority.
EPA said parties should proceed as proposed in their notice to the EPA (and to DOJ for consent decrees) unless and until contacted by the agency (if an EPA administrative settlement) or DOJ (if a judicial consent decree).
Hazardous Waste Generators
If a facility is a generator of hazardous waste and is unable to transfer the waste off-site due to disruptions caused by the COVID-19 pandemic within the time periods required under RCRA to maintain its generator status, EPA said the facility should continue to properly label and store such waste and take the general steps identified above.
If these general steps are met, the EPA will, as an exercise of enforcement discretion, treat such entities to be hazardous waste generators, and not treatment, storage and disposal facilities. In addition, the EPA will continue to allow Very Small Quantity Generators and Small Quantity Generators to retain their status even if the amount of hazardous waste stored on site exceeds a regulatory volume threshold due to the generator’s inability to arrange for shipping of hazardous waste off of the generator’s site due to the COVID-19 pandemic.
Failure of Pollution Controls–
If a facility suffers from failure of air emission control or wastewater or waste treatment systems, or other facility equipment that may result in exceedances of enforceable limitations on emissions to air or discharges to water, or land disposal, or other unauthorized releases, the facility should notify the implementing authority as quickly as possible. The notification also should include the following information:
- pollutants emitted, discharged, discarded, or released;
- comparison between the expected emissions or discharges, disposal, or release and any applicable limitation(s); and
- the expected duration and timing of the exceedance(s) or releases.
The EPA will consult with authorized states or tribes, as applicable, in accordance with the July 11, 2019 memorandum on “Enhancing Effective Partnerships Between EPA and States in Civil Enforcement and Compliance Assurance Work” to determine the appropriate response.
Where the EPA implements the program directly, the EPA will evaluate whether the risk posed by the exceedance, disposal, or release is acute or may create an imminent threat to human health or the environment.
Facility Non-Compliance Posing Acute Risks or Imminent Threats
EPA said it expects all regulated entities to continue to manage and operate their facilities in a manner that is safe and that protects the public and the environment. However, if facility operations are impacted by the COVID-19 pandemic and the non-compliance may create an acute risk or an imminent threat to human health or the environment, the facilities should contact the appropriate implementing authority (EPA region, authorized state, or tribe). Even where a facility is located in an authorized state, EPA strongly encourages facilities and states to consult with their EPA regional office about the non-compliance that poses a potential for acute risks and imminent threats.
When EPA becomes aware of noncompliance that could result in an acute risk or an imminent threat to human health or the environment, the memo says EPA will act as follows.
- In authorized states, EPA will first consult with the state or tribe to determine if the state-issued permit or regulations have provisions that address the situation and result in a return to compliance.
- Where EPA administers the regulatory program, the agency will take the following actions:
a. The EPA regional office will evaluate whether an applicable permit, statutory, or regulatory provision addresses the situation;
b. If there is no permit/regulatory provision that addresses the situation, the EPA will work with the facility to minimize or prevent the acute or imminent threat to health or the environment from the COVID-19-caused noncompliance and obtain a return to compliance as soon as possible;
c. EPA will inform the relevant state or tribe of any acute threats and actions taken in response to the noncompliance; and
d. The EPA will consider the circumstances, including the COVID-19 pandemic, when determining whether an enforcement response is appropriate.
EPA indicated that absent exigent circumstances, it would not require facilities to “catch-up” with missed monitoring or reporting if the underlying requirement applies to intervals of less than three months. For other monitoring or reports, such as those required on a bi-annual or annual basis, the EPA expects facilities to take reasonable measures to resume compliance activities as soon as possible, including conducting late monitoring or submitting late reports when the policy is no longer in effect.
In screening cases for referral to DOJ for potential criminal violations, EPA said it will distinguish violations that facilities know are unavoidable as a result of COVID-19 restrictions from violations that are the result of an intentional disregard for the law. EPA indicated its Criminal Investigative Division would remain vigilant and is prepared to pursue violators who demonstrate a criminal intent.
Finally, EPA said it may provide additional enforcement guidance applicable to specific regulatory programs on an ongoing basis. The agency also reminded the regulated community that the EPA’s self-disclosure program remains available for violations that are voluntarily reported .
On Saturday, March 21, 2020, New York Governor Andrew Cuomo issued a new Executive Order No. 202.8 (EO 202.8) “Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency ” requiring all businesses and not-for-profit entities to require 100% of workers to work from home effective at 8 p.m. Sunday, March 22, 2020.Businesses or entities providing essential services or functions are not be subject to the in-person workplace restrictions
The New York State Department of Economic Development (Development d/b/a Empire State Development) has issued guidance on what constitutes “Essential Services”. Businesses engaging in Essential Services must comply with the guidance and directives for maintaining a clean and safe work environment issued by the Department of Health
Paragraph 11 of the guidance covers “Services and agencies that exist to maintain the safety, sanitation and essential operations of residences or other essential businesses”. Among the type of services listed are:
- Emergency management and response
- other related construction firms and professionals for essential infrastructure or for emergency repair and safety purposes
The New York State Department of Environmental Conservation (NYSDEC) has advised environmental professionals that these services are being interpreted to apply to emergency (spill) response and remedial activities at inactive hazardous waste sites, including the operation and maintenance of remedial systems put in place for the protection of public health. Thus, parties doing work under one of the DEC’s remedial programs are expected to continue to implement their work plans.
There have been anecdotal reports of delays in field work because of limited personnel availability and obtaining approvals for off-site disposal of contaminated soil. If remedial parties are encountering delays that could impact compliance with approved deliverable schedules, they should advise the NYSDEC project managers to request extensions. Other actions should include documenting the reasons for the delays and efforts taken to avoid or mitigate the delays.
On February 20th, EPA Announced it will make a regulatory determination (RD) for two emerging contaminants-perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA)- under the Safe Drinking Water Act as part of its fourth Contaminant Candidate List. As part of this action, EPA plans to propose nationwide drinking water monitoring for PFAS under the next Unregulated Contaminant Monitoring Rule (UCMR) monitoring cycle (UCMR 5) utilizing newer methods available to measure more PFAS and at lower minimum reporting levels than previous UCMR monitoring. EPA is also seeking comments on regulatory approaches for other per- and polyfluoroalkyl substances (PFAS).
A regulatory determination is a decision about whether or not to begin the process to propose and promulgate a national primary drinking water regulation (NPDWR) for an unregulated contaminant. A preliminary regulatory determination set forths EPA’s view about whether certain unregulated contaminants meet three statutory criteria.In proposing this regulatory determination, EPA found that these substances meet the three statutory criteria: (1) PFOA and PFOS may have an adverse effect on human health;(2) that PFOA and PFOS occur in Public Water Systems (PWS) with a frequency and at levels of public health concern; and (3) that regulation of PFOA and PFOS presents a meaningful opportunity for health risk reduction for persons served by PWS.
After EPA considers public comment, EPA makes a final determination. For PFOA and PFOS, the agency may promulgate a maximum contaminant level (MCL) or issue a treatment technique much like it has done with the lead and copper rule. If EPA decides to issue MCLs for PFOA, PFOS, and/or other PFAS chemicals, PWSs could be required to monitor for these contaminants. In the RD, EPA says it may seek to minimize the monitoring burden on water systems while assuring public health protection. Minimizing the monitoring burden to the maximum extent feasible and allowed by statute could reduce costs for drinking water systems that have other important risk-reduction resource demands. The EPA is considering alternative approaches for this monitoring that reduce monitoring frequency for systems that are reliably and consistently below the MCL or do not detect the contaminant.
PFAS are found in a wide array of consumer and industrial products. PFAS manufacturing and processing facilities, facilities using PFAS in production of other products, airports, and military installations have been associated with PFAS releases into the air, soil, and water. PFOS and PFOA—two of the most widely-studied and longest-used PFAS and have been detected in up to 98% of serum samples taken in biomonitoring studies that are representative of the U.S. general population.
The pre-publication copy of the proposed regulatory determination may be viewed Here
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Earlier this month, the New York State Department of Environmental Conservation (NYSDEC) just released its new “Guidance for Sampling and Analysis of PFAS Under NYSDEC’s Part 375 Remedial Programs January 2020” (“PFAS Guidance”). The purpose of the PFAS Guidance is to establish procedures for sampling PFAS and for determining if PFAS is a contaminant of concern for a particular site requiring remediation. The PFAS Guidance is not yet available on the NYSDEC website but has been distributed to consultants working on sites subject to one of the DEC remedial programs.
Since the NYSDEC has not yet established Ambient Water Quality Standards (AWQS) and Soil Cleanup Objectives (SCOs) for PFAS , the PFAS Guidance states that the NYSDEC will determine on a case-by-case basis if PFAS-contaminated media will be subject to remediation.
The PFAS Guidance states that all future workplans should include PFAS sampling and analysis procedures that conform to the PFAS Guidance analysis will be required for sampling of soil, groundwater, surface water, and sediment but not soil vapors. The field sampling procedures for the various media are set forth in the appendices. Appendix B establishes the sampling protocols for soils, sediments or other solids. Appendix C sets forth the sampling protocols for non-potable groundwater monitoring wells. Appendix D contains the methodology for sampling PFAS in surface water, Appendix E applies to PFAS sampling of private water supply wells and Appendix F for collecting PFAS samples from fish tissue. Laboratories analyzing environmental samples for PFAS must hold ELAP certification for PFOA and PFOS in drinking water by EPA Method 537.1 or ISO 25101
Appendix G of the PFAS Guidance contains a list of 19 PFAS substances that are to be initially analyzed for all remedial program sites. This PFAS Analyte List may be adjusted or refined for a particular site depending on investigative results.
Water Sample Results –
The PFAS Guidance states that PFAS will be a potential contaminant of concern in groundwater or surface water requiring further assessment when PFOA or PFOS is detected in any water sample at or above 10 ng/L (ppt).
In addition, NYSDEC indicates that further assessment of water may be warranted if either of the following screening levels are met:
- any other individual PFAS (not PFOA or PFOS) is detected in water at or above 100 ng/L; or
- total concentration of PFAS (including PFOA and PFOS) is detected in water at or above 500 ng/L
Soil Sample Results
The PFAS Guidance states that for purposes of delineation and remedy selection, soil samples should be tested using the Synthetic Precipitation Leaching Procedure (SPLP) and the leachate analyzed for PFAS. Soils exhibiting SPLP results above 70 ppt for either PFOA or PFOS (individually or combine) are to be evaluated during the cleanup phase.
The PFAS Guidance notes that the SPLP leachate criteria is based on the Maximum Contaminant Levels (MCL) proposed for drinking water by New York State Department of Health. Thus, the SPLP criteria may be updated based on future federal or state regulatory standards.
NYSDEC indicates in the PFAS Guidance that remedial parties have the option of analyzing samples concurrently for both PFAS in soil and in the SPLP leachate to minimize project delays.
Testing for Imported Soil
The PFAS Guidance states that soil imported to a site for use in a soil cap, soil cover, or as backfill must be tested for PFAS in general conformance with DER-10, Section 5.4(e) for the PFAS Analyte List (Appendix F) using the analytical procedures discussed below and the criteria in DER-10 associated with SVOCs.
- If PFOA or PFOS is detected in any sample at or above 1 µg/kg, then soil should be tested by SPLP and the leachate analyzed for PFAS.
- If the SPLP results exceed 10 ppt for either PFOA or PFOS (individually) then the source of backfill should be rejected, unless a site-specific exemption is provided by DER.
PFAS Sampling For Sites Subject Site Management
For sites that were previously remediated and are now under site management, the PFAS Guidance says PFAS will need to be analyzed to determine if modification to any components of the SMP is necessary (e.g., monitoring for PFAS, upgrading treatment facilities, or performing an RSO).
Thus, much like MTBE sites in the 1990s and chlorinated sites in the early 2000s, it is possible that sites that have received certificate of completion may become subject to reopeners where PFAS was not previously assessed and site management sampling identifies PFAS as a contaminant of concern. As the noted American philosopher Yogi Berra once said, “It Aint Over Till its Over.”
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Performing environmental due diligence has become easier with the launch of the New York State Department of Environmental Conservation DECInfo Locator.
Until the launch of this website, consultants and attorneys seeking information about contaminated sites had to file requests under the state Freedom of Information Law (FOIL). The limited NYSDEC FOIL staff usually took weeks to respond to requests and requestors often had to visit agency offices to review dusty paper files.
To promote greater transparency, NYSDEC launched its DEC Info Locator project. Environmental reports and permits have been scanned and may be viewed electronically. Orders on consent beginning with January 2019 and documents from administrative hearings dating back to 2017 are currently available. Older consent orders and administrative materials will be added in future iterations of DECinfo Locator.
The interactive map also provides data about environmental quality of specific sites around the state and information about outdoor recreational sites. More than 50 data layers are available.
The DEC Info Locator website is available at: https://www.dec.ny.gov/pubs/109457.html
A YouTube video is available to help users explore the site. https://www.dec.ny.gov/pubs/109457.html
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Christmas arrived early for brownfield developers when the United States Treasury Department (“Treasury”) and the Internal Revenue Service (IRS) released the final set of Opportunity Zone (OZ) regulations on December 19th . The final rules confirm that developers of brownfield sites will be eligible for the favorable tax treatment available under the OZ program. The final OZ rules were published in the federal register earlier this week.
The final OZ rule amends the Income Tax Regulations (26 CFR part 1) by adding final regulations under section 1400Z-2 of the IRS Code. Section 1400Z-2 provides two main federal income tax benefits to eligible taxpayers that make longer-term investments of new capital in one or more designated qualified opportunity zones (QOZs) through qualified opportunity fund (QOF) and qualified opportunity zone businesses.
The first main Federal income tax benefit is the ability of eligible taxpayers to defer certain capital gains until as late as December 31, 2026. Moreover, eligible taxpayers may potentially exclude 10% of such deferred gain from gross income if the eligible taxpayer holds the qualifying investment in the QOF for at least five years. In addition, taxpayers may exclude an additional 5% of such gain if the eligible taxpayer holds that qualifying investment for at least seven years.
The second main Federal income tax benefit is that eligible taxpayers may exclude appreciation on the eligible taxpayer’s qualifying investment in the QOF if the eligible taxpayer holds the qualifying investment for at least 10 years.
Section 1400Z2-2(d)(2)(D) requires either that the original use of qualified opportunity zone business property in the QOZ commences with the QOF or qualified opportunity zone business or that the QOF or qualified opportunity zone business substantially improve the property. After Treasury and the IRS proposed rules in October 2018, developers and the EPA Office of Brownfields and Land Revitalization filed comments requesting clarification on how the “substantial improvement” and the “original use” tests applied to brownfield sites. See our blog post discussing the issues in more detail.
Treasury and IRS issued a second notice of proposed rulemaking in May 2019 (84 FR 18652) responding to the initial comments. The revised proposed rules did not fully address the comments submitted by EPA and the brownfield community.
The third time proved a charm for brownfield developers as the final rule unequivocally and clearly addresses EPA and brownfield developer concerns raised in the two preceding rounds of rulemaking.
Vacancy Period to Qualify for Original Use.
The proposed regulations provided that a building or other structure must be vacant for at least five years prior to being purchased by a QOF or qualified opportunity zone business to satisfy the “original use” requirement. Some commenters suggested the five-year period was too long while others were concerned a shorter period would incentivize developers to warehouse properties.
As a result, the final rule modifies the vacancy period. There is now a special one-year vacancy requirement for property that was vacant prior immediately to the date of publication of a QOZ containing the property is located.. For property that was not vacant at the time of such QOZ designation notice but becomes vacant later, the final regulations require the property to be vacant continuously for at least three years.
Clarification of the Term “Vacant” for Purposes of Applying the Vacant Property Rules
Commenters also asked Treasury and IRS to clarify the meaning of “vacant”. The agencies were told that local governments often hold inventories of brownfield sites and other blighted properties through tax delinquency, abandonment, bankruptcy, with varying historic uses and that there were differing regulatory definitions under state and federal programs of what constituted a vacant site.
The final QZ regulations provide that real property (including land and buildings) is considered to be in a state of vacancy if the property is “significantly unused.” A building or land is considered “significantly unused” under the final regulations if more than 80% of the building or land is not used, as measured by the square footage of useable space.
Buildings Located on Brownfield Sites Qualify as “Original Use” Property
The final regulations make clear that “all real property composing a brownfield site, including land and structures located thereon,” will be treated by the IRS as satisfying the “original use” test requirement of section 1400Z-2(d)(2)(D)(i)(II). In making this decision, Treasury wrote :
“Cleaning up and reinvesting in these properties increases local tax bases, facilitates job growth, utilizes existing infrastructure, takes development pressures off of undeveloped, open land, and both improves and protects the environment”
Clarification of Activities and Expenses That Count as “Substantial Improvements” Test
The final rule provides that the costs of brownfield site assessment and remediation are eligible as cost of “substantial improvement” where:
“ the land has been more than minimally improved, and that the QOF or qualified OZ business must make investments into the brownfield site to improve its safety and environmental standards.”
Requests for Extensions and Safe Harbors Regarding 30-Month Substantial Improvement Period
The proposed rule required substantial improvements had to be completed within 30 months. Treasury received comments requesting an extension of the 30-month period for brownfield sites because of the delays associated with regulatory approvals.
The final regulations provide that if a governmental permitting delay has caused the delay of a project covered by the 30-month working capital safe harbor, and no other action could be taken to improve the tangible property or complete the project during the permitting process, then the 30-month working capital safe harbor will be tolled for a duration equal to the permitting delay.
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